Japan's benchmark stock index moved out of bear market territory on Friday following comments by Japan's Government Pension Investment Fund (GPIF) that shook Tokyo financial markets minutes before the close of trade.
GPIF said that it would raise its weighting of domestic stocks to 12 percent from its current 11 percent and lower its weighting of Japanese government bonds (JGBs) to 60 percent from 67 percent.
The news saw the Nikkei rally as much as 1 percent to briefly cross the 13,000 mark before swinging wildly between gains and losses.
The rest of Asia's equity markets accelerated their pace of losses following the Nikkei's volatility. Australia's S&P ASX 200 index closed at a new four-and-a-half-month low, South Korean shares hit a new six-week low and the Shanghai Composite dropped over 1 percent.
For the week, Asia's worst-performing index was the Nikkei. Its losses exceeded 6 percent while Shanghai equities came in second with losses of 4 percent.
(Read More: Nikkei Swings Give Markets Bad Case of Deja Vu)
Markets on Jobs Watch
The U.S. nonfarm payrolls report for May is released later in the day and could offer clues as to how long the Federal Reserve intends to keep buying bonds to stimulate the economy. If the data disappoint, the monthly $85 billion bond purchases are likely to be left intact, analysts say.
Nikkei Down 0.2%
Japan's index fell to as low as 12,660 in the morning session – marking a 20.5 percent downside from the peak of 15,942 hit in late-May. A bear market is characterized by a 20 percent or more decline in a market.
Market heavyweights reversed earlier losses and led afternoon gains. Fast Retailing surged 5.5 percent, while Tokyo Electric Power surged over 8 percent.
Currency moves were in focus after the yen traded at 96 per dollar, moving off an earlier two-month high around the 95 handle. This spelled out heavy losses for key exporters. Electronic manufacturer Taiyo Yuden closed down 8 percent while Toyota Motor and Nissan Motor fell 3 percent each.
(Read More: Yen Rally Sends Shock and Selling Through Markets)
Ben Colette, head of Asian equities at Sunrise Brokers in Hong Kong, said he wouldn't recommend reentering the market until a clearer base is formed.
"You need to let the market find a support. If we find stability around 12,500, traders and investors will put money to work. What you don't do right now is start running into this and start filling up the truck," he said.
Sydney Down 1%
Australian miners dragged on the benchmark index with Newcrest Mining falling 7.6 percent after writing down the value of its assets by $6 billion. Gold producer Medusa Mining also fell on the news, tumbling over 10 percent.
The index post a loss of 4 percent for the week after a series of disappointing economic reports, including first-quarter gross domestic product (GDP) figures.
"There is a sense that Australia could move into recession in early 2014 as the response to the 200 basis-point rate cuts over the last 18 months has seen almost no change in the habits of the Australian consumer," said Evan Lucas, market strategist at trading firm IG in a morning note.
Kospi Falls 2%
South Korea's benchmark index played catch-up with the region after being shut for Thursday's public holiday.
(Read More: Japan's Neighbor Suffers Brunt of 'Abenomics')
Shares of market heavyweight Samsung Electronics tumbled over 6 percent and led the benchmark index to its lowest levels since April 24 after a brokerage released a report on the tech giant's thinning margins in the handset business.
Shanghai Slips 1.5%
Mainland equities logged a sixth straight session of losses, hitting a fresh three-week low, with sentiment cautious ahead of a slew of economic reports over the weekend.
Inflation, producer prices, fixed-asset investment and industrial output data for the month of May are due to be released on Saturday.
(Read More: This Weekend, Brace for China's Data Deluge)
Activity was subdued ahead of next week's 'Dragon Boat' holiday. Financial markets will be shut from Monday to Wednesday and will resume trade on Thursday.
— By CNBC.com's Nyshka Chandran. Follow her on Twitter @NyshkaCNBC